TSMC raises capex to record $8.5 billion, pulls in 20-nm

LONDON – Taiwan Semiconductor Manufacturing Co. Ltd. has raised its planned capital expenditure for 2012 to between $8 billion and $8.5 billion. The move accompanied the announcement of first quarter financial results and strong second quarter outlook by the foundry.

TSMC (Hsinchu, Taiwan) said that it needed to increase capex because of stronger than expected demand for 28-nm wafers and because it has decided to "pull in" the creation of a 20-nm R&D process line.

Three months ago TSMC had lowered its capex estimate to about $6 billion, down from $7.3 billion in 2011. While analysts had expected TSMC to raise capex to about $7.5 billion the figure given by TSMC exceeded expectations. It suggests the company is reacting to a shortfall experienced by leading-edge customers such as Qualcomm.

However, despite those supply shortfalls at 28-nm TSMC enjoyed a profitable first quarter. The company announced a net income of of NT$33.47 billion ($1.14 billion) on consolidated revenue of NT$105.51 billion (about $3.60 billion) for the first quarter ended March 31, 2012. TSMC expects revenue to increase significantly in the second quarters to
be between NT$126 billion (about $4.30 billion) and NT$128 billion
(about $4.37 billion).

The 28-nm process technology accounted for 5 percent of total wafer revenues in the first quarter, 40-nanometer was 32 percent, and 65-nanometer accounted for 26 percent. Together these advanced technologies accounted for 63 percent of total wafer revenues, the company said.

TSMC's nearly 30% net profitability is impressive these days in the hardware industry! I am not at all surprised to see 65-nanometer accounting for 26 percent... not all the products need advanced tech nodes. Further, I would suspect the older technology nodes are also the ones with higher profit margins with better yields.
MP Divakar